Remember the "energy crisis" of the 1970s?
Sure you do. Following the Arab oil embargo, we turned out the street lights, turned down our thermostats and queued up at the gas pumps.It was considered by many to be nothing less than a non-shooting war, and the clear and present enemy was the Organization of Petroleum Exporting Companies, known by its evil acronym, OPEC.
Politicians and pundits alike subscribed to what became something of a mantra: The United Statesimports more than half of its crude oil, a frightening fact that holds us hostage to those greedy Middle Eastern sheiks. Something has to be done, and soon.
Well, guess what? Two decades later, America still imports more than half of its oil. But the biggest crisis in Utah these days is how we're going to get our cars around all the construction barriers, not how we're going to fill our tanks with what still remains some of the least expensive gasoline in the world.
Are we living in a fool's paradise? Are we only a terrorist act away from a return to the bad old days of skyrocketing fuel costs and ration coupons?
Probably not. The 1991 Desert Storm war with Iraq demonstrated to Saddam Hussein and anyone else who was paying attention just how far the Western nations are willing to go to protect their interests in the Middle East's oil fields.
Still, Jim Peacock, longtime executive director of the Utah Petroleum Association who retired late last month, says it's a mistake to assume we'll always be able to pull into our local self-service station and fill up for little more than a buck a gallon.
"Every Utahn has a huge stake in our local oil industry," Peacock said. "You have to remember that we're dealing with a finite resource. If crude oil can't be found in Utah or the surrounding Mountain West area, then you'll be looking at trucking or pipelining in finished product from the West Coast, and that will add a great deal to the price of what we would pay for a gallon of gas or diesel fuel."
During his 16 years at the helm of the UPA (a search is now being conducted to find his replacement), Peacock was regularly assailed by angry motorists whenever gasoline prices bumped up a few pennies.
"Funny, no one ever called to congratulate me when the price went down," he noted.
"But people in Utah have to realize that we're in one of the most competitive fuel markets in the nation and that has, so far, worked to their benefit."
Peacock said the retail price of gasoline locally has always been several cents below most out-of-state prices, except for some areas in the Deep South.
That is interesting considering that drilling for oil in Utah is more costly than in any other state but Alaska (excluding offshore drilling). In 1994 (the latest data available), the average cost-per-foot of drilling in Utah was $83.23, compared to $65.16 for all other states.
Jim Carter, director of the Utah Division of Oil, Gas and Mining, says the long decline in Utah oil production seems to finally be ending.
He said the price increases in crude oil last fall, when prices hit $24 per barrel, spurred a lot of local activity in oil and gas drilling. "It only takes a few dollars increase to make a prospect look better," he said.
Technology advances, such as water injection and horizontal drilling, also are producing a lot of oil and gas from old wells that were previously untappable.
And increasing interest in natural gas, rather than coal, as a fuel for powering electricity generators is spurring well development, Carter said, in the face of deregulation of the electric utilities industry.
"Thanks to a combination of things, Utah's oil and gas industry is actually in pretty good shape today," he said.
Jeff Burks, director of the Utah Office of Energy and Resource Planning, says the chances are remote that Utahns will have to face gas lines or rationing in the near future, and he credits that to deregulation of the oil industry.
"One of the things that's often overlooked, when comparing today with the 1970s, is that back then we had highly regulated markets on the production and retail sides," Burks said.
Entitlement programs required large refineries to sell crude to small competitors, and government-mandated price ceilings kept the price down, despite excess demand for petroleum products, Burks said.
Today, when the industry runs into a shortage, prices are allowed to rise to whatever the market will bear, and equilibrium is restored.
Several of what Burks terms "price events" have occurred in Utah since 1979, but none of them has resulted in major disruptions to retail consumers. "Under the old system, you can bet we would have had some problems," he said.
Ironically, he says, a study of the energy crunch of the '70s indicates that the problem was not really due to a shortage of crude oil, as many believe, but rather in distribution and pricing at the retail level.
Last year, Utah's oil fields produced 19.3 million barrels of crude oil of which nearly 7.7 million barrels were exported to New Mexico and Texas, according to data gathered by Brett Hanscom and Thomas Brill of the state Energy Office.
A total of 34.8 million barrels from Wyoming, Colorado and Canada were brought into the state by pipeline and refined at Utah's five refineries in North Salt Lake and Davis County.
Last year, those refineries turned out 1.94 billion gallons of gasoline, diesel fuel and jet fuel and exported 825 million gallons via pipeline to Idaho and the Northwest.
Thayne Robson, director of the University of Utah Bureau of Economic and Business Research, takes a more laid-back view of the situation, noting the prognosticators tend to err on the side of pessimism.
"The price of oil was supposed to be $70 a barrel now, and it's $20 a barrel," said Robson. "They really got it wrong back then (in the '70s and early '80s).
"All my life, people have been talking about oil being a finite resource, but they never say how finite," said Robson. "Thirty years ago, they said we had about a 30-year supply, but they're saying the same thing today. I've outlived two of those cycles already."
The forecasters who predicted $70 a barrel crude oil failed to understand that a number of things would occur as people and businesses faced that specter: The nation would begin to seriously search for ways to conserve energy, including increased fuel mileage of motor vehicles.
Those who want to put a better spin on the fact that the country imports more than half its crude oil point out that it's much better to use up other countries' oil reserves first and save our own for later. It's a perverse idea but not totally without merit, except for Peacock's caution that the domestic oil spigot is not something you turn on and off at will.
Either way, Utah continues to add population - and cars - on a daily basis and shows no signs of cutting back anytime soon. Will the reconstruction of I-15 slow auto usage? Robson doesn't think so.
But neither does he worry much about terrorism putting a kink in the supply chain.
"There isn't much tolerance for terrorism in the energy business these days. Desert Storm taught us that. If someone tried to interrupt it in a major way, they would have to take on the United States and other major powers in the world, and I doubt there are many who are really willing to take us on. Terrorism pays off in many ways, but not in the energy business."
Numerous studies and forecasting scenarios move through the U. bureau, and none of them foresees energy prices rising much through the years 2005 to 2010.
"None of the models sees energy as a major constraint to growth," said Robson.
Still, Peacock worries about the nation's dependence on imported oil, noting that "if anything should go amiss, or even be threatened, it could cause havoc on the world markets."
True, the country is not as dependent on Middle Eastern oil as it was in the 1970s, he notes, but that's only because Canada, Mexico, Venezuela, Ecuador and other Western Hemisphere nations have become significant producers and exporters of crude oil to the United States.
But Peacock notes that depending on these countries is not the long-term answer to America's energy independence.
"We ought to develop our own resources so we can be semi-self-sufficient. Developing crude oil production doesn't happen overnight. It takes years between the initial seismic work, land-tract leasing, arranging of capital and then getting wells drilled."
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ADDITIONAL INFORMATION
Oil industry in Utah
One barrel* of crude oil equals:
19.4 gallons of gasoline
8.9 gallons distilled fuel oil
4.2 gallons jet fuel
9.5 gallons hydrocarbon products
*42 gallons
Production by county
Percent of state total
San Juan 33%
Duchesne 28%
Summit 20%
Uintah 17%
Other 2%
Gas facts:
Licensed drivers: 1.25 million
Annual gasoline use: 902 million gallons
Aviation fuel: 224 million gallons
Diesel: 260 million gallons
Gas stations: 2,100
Natural gas stations: 16
Passenger cars: 821,000
Trucks: 634,000
Gas sold self-service: 97%
(highest in the nation)
Gasoline and special fuel taxes: $195 million (1996)